What Is An IVA (Individual Voluntary Arrangement)?

Since its conception in the 1980s, individual voluntary arrangements (IVAs) have been an increasingly popular option for individuals that have a debt mountain that they are finding difficult to climb. Initially, were set up to help businesses facing bankruptcy but they became popular with members of the public once their advantages became more widely known.

To avoid falling into bankruptcy, borrowers can set up an individual voluntary arrangement with their creditor(s). The agreement consists of organizing the return payment either over time or immediately of the owed sum in return for the debt to be written off. Payments can be made either in one lump sum or monthly at a minimum of around $300 a month for a period of a maximum of five years.

The benefits for taking up an individual voluntary arrangement with your creditors are vast. The reason more than 6000 people take up IVAs with their creditors every year is down to: protection against court action from your creditors, frozen interest and late payment fees, and a repaired credit rating once your debt is written off.

If you have amassed a large number of credit and debit cards, store cards, catalogue debts, overdrafts and personal and business loans, an IVA may be your best option to possible reduce your debt by up to 75%. Though you must be in a position to be able to afford either a lump sum or a monthly payment of at least $300 per month.

You will need to hire an insolvency practitioner to propose an IVA to your creditors - you can not do it yourself. How much they charge you will depend vary on the area that you live and experience of the practitioner. Many will include their fee in your agreed monthly IVA repayment, so at least you will not have to find extra money to pay them on top of your IVA repayments. Always shop around for a reputable insolvency practitioner as hiring an incompetent ones will lead to you wasting the money that you pay upfront for fees.

To qualify for an IVA you will need to have a minimum of around $20,000 debt. Also, 75% of your creditors (in monetary terms) must agree to the terms and repayment scheme of the IVA. So long as 75% agree, those who do not agree will be legally bound to accept it. However, if less than 75% agree, the IVA will fail. If that happens then you can change the terms of the IVA and try again, though this will involve paying more fees to your practictioner.

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